Experience in implementing FTAs

Despite violent pandemic and geopolitical upheavals, 2020 marked an important milestone in Vietnam’s international economic integration.

The signed FTAs contribute to expanding export opportunities for Vietnamese agricultural products. (Photo: Duc Thuy)
The signed FTAs contribute to expanding export opportunities for Vietnamese agricultural products. (Photo: Duc Thuy)

Motivation for growth

In addition to the effectiveness of the EU-Vietnam Free Trade Agreement (EVFTA) since August 1, 2020, the Regional Comprehensive Economic Partnership (RCEP) agreement was signed under the framework of the 37th ASEAN Summit, helping to create a market with 2.2 billion consumers, accounting for about 30% of the world’s population and a total GDP of approximately VND26.2 billion (about 30% of the global GDP). This is a happy ending after eight years of intense negotiations, even without the participation of India.

By the end of November 2020, Vietnam had been negotiating 16 free trade agreements (FTAs) that cover almost all continents including nearly 60 economies, with total GDP accounting for about 90% of world GDP, as well as 14 agreements set to come into force.

The signed FTAs ​​also contribute to creating optimism in the business community, consolidating business confidence as well as promising a bright economic outlook.

“Despite a difficult year for international trade in 2020, our survey shows that Vietnam's quick and effective response to the global pandemic has proved its efficiency. Leaders of European enterprises feel more positive about their businesses as well as Vietnam's trade and investment environment,” said Chairman of the European Chamber of Commerce (EuroCham) in Vietnam Nicolas Audier at the ceremony to announce the Business Climate Index (BCI) in the fourth quarter of 2020.

Caring for orchard in the wait to pick fruit

Prime Minister Nguyen Xuan Phuc expressed his delight at the effectiveness of the EVFTA but also reminded that results gained from FTAs ​​have yet to match the potential and raised many big bottlenecks that must be removed. It is the necessity to improve communication efficiency about international economic integration and FTAs in particular, to remove invisible barriers for businesses, and to change the mindset of doing business in a more proactive manner to meet the requirement of FTAs, among other tasks.

Indeed, if you compare FTAs ​​to an orchard, the gardeners must invest both capital and effort in the orchard every day before they can enjoy the fruit from this garden. And almost no single enterprise can do this alone; the process requires cooperation and linkage.

According to General Director of Garment 10 Corporation Than Duc Viet, Garment 10 produces 18 million shirts and 1.5 million suits each year, so it needs 30 million meters of shirt fabric and 5 million meters of suit fabric. However, the company has to import 60-70% of materials from China to serve its production because raw materials produced in Vietnam are more expensive than imports from China while the speed of development of models and production time is also longer.

It means that the company cannot benefit from EVFTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) because it does not meet requirements on origin of products.

“The policy of promoting multilateral relations through Vietnam's participation in a series of FTAs ​​is absolutely correct, but it will only bring into full play when Vietnam can successfully solve challenges regarding labour conditions, environmental protection and social responsibility,” said Dr. Vo Tri Thanh, Director of the Institute for Brand and Competitiveness Strategy.

Responding to barriers

Although the dispute settlement mechanism will be more complete because both the CPTPP and the EU-Vietnam Investment Protection Agreement (EVIPA) have provisions to improve the transparency of the proceedings, Vo Tri Thanh warns that once tariff barriers are no longer an effective tool for protection, importing countries tend to use non-tariff measures (anti-dumping, anti-countervailing and trade remedies measures) to protect their own domestic manufacturing industry.

As an experienced lawyer in handling international economic disputes, Dinh Anh Tuyet, an arbitrator from the Vietnam International Arbitration Centre (VIAC) said that: “It is important to note that signed FTAs are not only a "sweet fruit", but also a "bitter fruit" for Vietnamese enterprises because if businesses do not comply with the standards stated in the FTA, the partners will apply new handling measures, and even lawyers like us do not know what the measures are, because they all appear for the first time in the agreements.”

The implication that the lawyer wants to talk about is that Vietnamese enterprises need to have the right attitude and actively respond to the risks of commercial disputes. It is also the choice that proves the correctness that shrimp exporting enterprises have applied from 2004 to present.

The preparation is sometimes very simple things such as maintaining detailed traceability records, accounting records, and production records in order to request timely support from the State and lawyers to protect their interests when there are violations under trade and investment agreements or when there are signs of trade fraud and tax evasion.

The cooperation with associations and importers and the coordination with investigating bodies when under investigation are also obvious recommendations but are sometimes neglected by enterprises. Besides FTAs, institutional reform and efforts from each enterprise are also key forces for long-term development.